In accounting terms, an asset is anything owned or control by an entity. It’s anything that is used to create positive economic value for the entity. Assets also represent value of ownership which is able to be converted into cash flow over time. The assets in an organization can consist of anything from fixed assets like plant and machinery to intangible assets like licenses and contracts.
In the process of asset management, two important things are identified first: an asset and its corresponding liability. By dividing assets into their two categories, the first step towards asset management begins. The second step is to identify and measure the assets as well as their related liabilities.
A company’s balance sheet, also known as the statement of equity, provides information about its current assets and current liabilities. The balance sheet is a summary of what the company owns at any given time. It divides assets into two categories: short-term and long-term assets. Long-term assets include accounts receivable, inventory, accounts payable, and capital assets like plant and machinery. On the other hand, short-term assets refer to inventory, working capital, and assets used to make goods and services that will not be used for more than a year.
The balance sheet will show how much current assets a company has versus its current liabilities. The current assets usually consist of fixed assets such as plant and machinery. However, the company may have variable assets like trade credit and accounts receivable that are included in its current assets. A company must always have access to the money necessary to make good payments on its fixed assets.
The net worth of a company is the difference between its current assets and its liabilities. The most common way to calculate a company’s net worth is to add current assets plus its fixed assets. The resulting value is the company’s net worth. The purpose of a balance sheet is to provide investors with information about the solvency of the company, its credit rating, and its ability to pay debts.
An effective asset management process starts with an assessment of the risks that a company faces. The goal of an effective asset management process is to build financial value by removing non-value items from its balance sheet. A company can remove non-value items by selling, trading, or leasing its fixed assets. This would significantly increase the equity and net worth of the company.
An asset lifecycle is a company’s total asset life cycle, beginning with the first asset produced and ending with the last asset disposed of. The length of an asset lifecycle, also called the asset life cycle, begins with the production of the product and continues through the life of that product, including service, sales, disbursement, retirement, and disposal. Some companies use internal processes or external databases to track their assets lifecycle. Companies must consider how internal and external processes and databases will integrate with each other and how those systems will be affected by economic, regulatory, and operational changes.
Another critical part of an effective asset management process is asset tracking. Companies must have accurate records of their inventory and identify where inventory is in real estate, inventory aging, and location on the property grid. These records help to determine the allocation of resources between working capital, inventory, and capital expenditures. Again, an effective asset management process starts by assessing how those assets are currently being managed, followed by the identification of opportunities for improvement, and finally the creation of an action plan to achieve those goals.
How are assets being managed? There are many ways to manage assets, but two of the most common methods include the use of internal and external sources. Internal asset management is achieved when management policies and procedures are followed consistently. Examples of internal asset management include asset control, budgeting and scheduling, and asset management reporting. External asset management is achieved through procurement; however, it can also be achieved through acquisition initiatives, asset tracking, and the distribution of inventories.
What is an inventory management tool? Inventory management tools are designed to improve inventory management and accuracy by allowing users to more efficiently and accurately complete work tasks related to the management of inventories. Examples include inventory management software and desktop-based inventory management tools. This type of software can reduce the time needed to maintain inventories and improve the ability to precisely identify types of inventory that are in good condition, and those that are not. Desktop-based inventory management tools require minimal customization. These inventory management tools allow users to generate reports and perform other functions related to the management of inventories.
What is an asset lifecycle management tool? An asset lifecycle management tool (also known as an asset lifecycle manager) is a web-based application that assists operations managers in planning for their company’s inventory needs. The application helps operations managers identify assets’ life cycles, for example whether they should be sold upgraded, or disposed. It can also help determine which assets should be replaced, and which may be upgraded, according to a company’s inventory requirements. Operations Cloud, Incorporated offers a suite of web-based asset management tools, which are designed to provide operational advantages to operations.